Small Investors Returning to Crypto Market, But Cautiously
Small investors are slowly making their way back into the cryptocurrency market, although they are not yet as enthusiastic as they were during the previous bull market. Coinbase Global Inc, the largest US crypto exchange, reported a 60% increase in net consumer transaction revenue in Q4 compared to the previous year, and an 80% increase from Q3. Robinhood Markets Inc., which focuses on retail users, also saw a significant rise in crypto notional volumes in December, increasing by 242% from the previous year.
This indicates that mom-and-pop traders, who suffered significant losses after the crypto-price collapse in 2022, may be starting to regain confidence due to the excitement surrounding the launch of US exchange-traded funds investing directly in Bitcoin. Despite the volatility of cryptocurrencies, the allure of potential high returns is drawing some consumers back into the market.
Retail Traders Crucial to Crypto Market
Retail traders play a crucial role in the cryptocurrency market. They were responsible for a large portion of revenues on Coinbase during the last bull run and are important revenue drivers for other crypto exchanges as well. However, it seems that retail investors have not fully reentered the market yet. Web searches for the term “Bitcoin,” which analysts use to gauge retail interest, spiked in January when ETFs were introduced but quickly dropped back down to bear-market levels according to Google Trends.
Downloads of popular crypto-exchange apps, frequently used by retail traders, also remain below their levels during the bull market. Binance, the world’s largest crypto exchange, experienced 10 million app downloads in Q4 compared to 9 million in Q3 and 8.1 million in Q4 2022.
Hot Take: Small Investors Slowly Reentering Crypto Market
Small investors are cautiously returning to the crypto market, encouraged by the launch of US exchange-traded funds investing in Bitcoin. Despite their previous losses, the potential for significant gains is enticing retail traders back into the market. However, their involvement is not yet as extensive as during the previous bull market. Retail interest, as measured by web searches for “Bitcoin,” spiked briefly but quickly fell back to bear-market levels. App downloads of popular crypto-exchange platforms also remain below their previous highs. The slow reentry of small investors suggests that there is still some hesitation and wariness surrounding cryptocurrencies.
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